CBO Analysis Dims Prospects of a Pell Entitlement

This week, the Congressional Budget Office (CBO) released an analysis of the fiscal impact of President Obama’s FY10 Budget Request. The analysis looks at the budget request broadly, as well as focuses in on some of President Obama’s major proposals on health care and student aid.

Of particular note, CBO revised down — from $94 billion to $87 billion — an earlier estimate of the savings that would be realized from eliminating the Federal Family Education Loan Program (FFELP) in favor of the Direct Lending program. The new estimate jeopardizes the President’s proposal to use savings from FFELP to fund a Pell grant entitlement. There already appears to be little stomach in Congress for the creation of another entitlement program. House Appropriations Chairman David Obey (D-WI) has articulated that he is reluctant to create a new entitlement program while simultaneously trying to convince the American people that the majority in Congress is fiscally responsible. Nonetheless, a permanent Pell grant remains possible and at a minimum, funding recouped from the elimination of FFELP would be put towards increased Pell grant levels for students. It should be noted that the financial sector, and many in Congress, are pushing to maintain the FFELP program and the role of banks and guarantee agencies in the administration of federal student loans.